NMVQ and Secretary, Department of Education (Social security second review)
[2024] ARTA 441
•29 November 2024
NMVQ and Secretary, Department of Education (Social security second review) [2024] ARTA 441 (29 November 2024)
Applicant/s: NMVQ
Respondent: Secretary, Department of Education
Tribunal Number: 2024/3131
Tribunal:Senior Member S Trotter (second review)
Place:Brisbane
Date:29 November 2024
Decision:The Tribunal affirms the decision under review.
…………[SGD]…………..
Senior Member S Trotter
Names used in all published decisions are pseudonyms. Any references appearing in square brackets indicate that information has been removed from this decision and replaced with generic information so as not to identify involved individuals as required by subsections 161(1B)-161(1C) of the A New Tax System (Family Assistance) (Administration) Act 1999.
Catchwords
Child care subsidy – overpayments – net rental losses and reportable superannuation contributions not included in income estimate – pause of debts and recovery during COVID-19 – delay by Centrelink – alternative child care options - whether administrative error – ‘financial hardship alone’ - whether special circumstances
Legislation
Administrative Appeals Tribunal Act 1975
Administrative Review Tribunal (Consequential and Transitional Provisions No. 1) Act 2024
A New Tax System (Family Assistance) Act 1999 (the Act)
A New Tax System (Family Assistance) (Administration) Act 1999
Cases
Angelakos v Secretary, Department of Employment and Workplace Relations [2007] FCA 25
Bokhoree and Secretary, Department of Social Services (Social services second review) [2017] AATA 871
Department of Education, Employment, Training and Youth Affairs v Prince (1997) 50 ALD 186
Dranichnikov v Centrelink [2003] FCAFC 133
Groth v Secretary, Department of Social Security (1995) 40 ALD 541
Ling and Department of Family and Community Services [1999] AATA 797
MDXJ v Secretary, Department of Social Services [2020] FCA 1767
Patterson and Secretary, Department of Social Services (Social services second review) [2017] AATA 1566
Perkich and Secretary, Department of Social Security [2007] AATA 300; 49 ALD 137
Re McLean and Secretary, Department of Family and Community Services [2003] AATA 321
Re Phillips and Secretary, Department of Family and Community Services [2005] AATA 996
Salangsang and Secretary, Department of Education, Employment and Workplace Relations [2010] AATA 55
Secretary, Department of Social Security v Hales [1998] FCA 210
Segran and Secretary Department of Education, Employment and Workplace Relations [2008] AATA 799
Shonoodh and Secretary, Department of Social Services (Social services second review)
Statement of Reasons
Background
Child care subsidy (CCS) is a family assistance payment to assist with the cost of child care. It is paid to approved child care providers to pass on as a fee reduction to individuals entitled to CCS. The level of entitlement depends upon a number of variables including total family income each financial year. Generally, recipients provide a family income estimate at the start of each financial year (which may be updated if circumstances change). Upon reconciliation following the end of the financial year, if there has been an underpayment, a top-up may be paid and if there has been an overpayment, a debt will be owed.
NMVQ was paid CCS for the 2020/2021, 2021/2022 and 2022/2023 income (financial) years, initially for one of her sons and then for both of her sons, based upon family income estimates provided by her. It was later ascertained that NMVQ’s actual family income for the relevant income years was more than estimated resulting in overpayments, and consequential debts. At issue is whether those debts are required to be repaid.
Services Australia - Centrelink (Centrelink) in administering the CCS scheme on behalf of the Respondent, on 23 November 2023, 23 November 2023 and 29 November 2023 respectively, decided to raise and recover CCS debts from NMVQ as follows:
(a)$11,669.57 for the 2020/2021 income year;
(b)$19,231.37 for the 2021/2022 income year; and
(c)$17,356.13 for the 2022/2023 income year,
on the basis that NMVQ’s family income estimate for each income year was less than her actual family income for each income year, meaning she received more CCS than to which she was entitled.
Following requests for review of the decisions, a Centrelink authorised review officer (on 21 February 2024) and the Social Security and Child Support Division of the Administrative Appeals Tribunal (the AAT) on first review (on 30 April 2024) affirmed the decisions.
On 16 May 2024, NMVQ applied to the AAT seeking second review of Centrelink’s decision.
From 14 October 2024, the AAT became the Administrative Review Tribunal (the Tribunal). Under the transitional provisions in the Administrative Review Tribunal (Consequential and Transitional Provisions No. 1) Act 2024 (the Transitional Act), applications for review to the AAT that were not finalised before 14 October 2024 are taken to be an application for review to the Tribunal. The Transitional Act gives the Tribunal the authority to continue and finalise any aspect of the review not already completed by the AAT. This decision and statement of reasons is made by the Tribunal.
In summary, the Applicant’s position is that she was not aware until the debts were raised that she had not been correctly estimating her family income as she had not realised that she was required to ‘add back’ net investment (rental property) losses and reportable superannuation contributions when estimating the income of her and her partner. She submits that the debts in the 2021/2022 and 2022/2023 income years (and also a debt that is not the subject of this application but that has been raised in relation to the 2023/2024 income year) could have been avoided if Centrelink had reconciled her entitlement for the 2020/2021 income year in a timely manner and she should therefore not be required to repay the debts that arose after the 2020/2021 income year.
In summary, the Respondent’s position is that any delay in the reconciliation process did not contribute to the existence or quantum of the debts and, further, NMVQ has financial capacity to repay the debts.
For the reasons that follow, the decision under review to raise and recover CCS debts for the 2020/2021, 2021/2022 and 2022/2023 is affirmed.
ISSUES
The statutory provisions relevant to this application are found within family assistance law, in particular the A New Tax System (Family Assistance) Act 1999 (the Act) and the A New Tax System (Family Assistance) (Administration) Act 1999 (the Administration Act), as it applied in the 2020/2021, 2021/2022 and 2022/2023 income years.
The issues which arise in this case are:
· Does NMVQ have CCS debts to the Commonwealth as raised for the 2020/2021, 2021/2022 and 2022/2023 income years? And, if so
· Are there grounds for write off or waiver of recovery of all or part of the debts?
CONSIDERATION
Issue 1: Does NMVQ have CCS debts to the Commonwealth as raised for the 2020/2021, 2021/2022 and 2022/2023 income years?
An individual’s CCS entitlement is calculated pursuant to Clause 3 of Schedule 2 to the Act. One of the variables relevant to assessing that entitlement is an individual’s adjusted taxable income. An annual cap may apply.
Clause 2(1) of Schedule 3 to the Act provides that an individual’s adjusted taxable income for a particular income year is the sum of:
(a)the individual’s taxable income for that year, disregarding the individual’s assessable FHSS released amount (within the meaning of the Income Tax Assessment Act 1997) for that year;
(b)the individual’s adjusted fringe benefits total for that year;
(c)the individual’s target foreign income for that year;
(d)the individual’s total net investment loss (within the meaning of the Income Tax Assessment Act 1997) for that year;
(e)the individual’s tax free pension or benefit for that year;
(f)the individual’s reportable superannuation contributions (within the meaning of the Income Tax Assessment Act 1997) for that year;
less the amount of the individual’s deductible child maintenance expenditure for that year.
Clause 3AA of Schedule 3 to the Act provides, where relevant, that an individual’s adjusted taxable income for an income year is taken to include the adjusted taxable income of their partner.
Subsection 67DB(2) of the Administration Act provides that a person’s rate of CCS may be calculated using their estimate, an indexed estimate, or indexed actual income. Section 103A of the Administration Act sets out the CCS reconciliation conditions for an income year. The reconciliation process, under section 105E of the Administration Act, compares the amount of CCS paid with the amount entitled for the income year. If there is an underpayment, a top-up may be paid. If there is an overpayment, a debt will be owed.
Subsection 71B(1) of the Administration Act provides that there is a debt to the Commonwealth if an amount is paid to individual by way of CCS for one or more sessions of care when they have no entitlement. Subsection 71C(1) of the Act provides that there is a debt to the Commonwealth, being the difference between the received amount and the correct amount, if an amount is paid to an individual by way of CCS for one or more sessions of care greater than the amount to which they were entitled.
The Respondent submitted in their Statement of Facts, Issues & Contentions (SFIC) and Supplementary Submissions that the Applicant’s and her partner’s estimated and actual adjusted taxable income (ATI) for the relevant income years were as follows[1]:
[1] Paragraph 46 of the Respondent’s SFIC dated 25 September 2024 and paragraphs 1 to 11 of the Respondent’s Supplementary Submissions dated 23 October 2024.
2020/2021
Estimated ATI Actual ATI NMVQ $45,000 $143,268 NMVQ’s partner $45,000 $105,018 Total $90,000 $248,646 2021/2022
Estimated ATI Actual ATI NMVQ $45,000 $173,337 NMVQ’s partner $45,000 $249,554 Total $90,000 $422,891 2022/2023
Estimated ATI Actual ATI NMVQ $46,710 $213,578 NMVQ’s partner $46,710 $182,261 Total $93,420 $395,839
The Respondent further submitted that following reconciliation of NMVQ’s income estimates with her actual individual adjusted taxable incomes (including NMVQ’s partner’s adjusted taxable income pursuant to Clause 3AA of Schedule 3 to the Act), NMVQ:
(a)received $22,666.95 CCS for the 2020/2021 income year, $11,669.57 in excess of her actual entitlement;
(b)received $19,231.37 CCS for the 2021/2022 income year, with the entire amount of $19,231.37 being in excess of her actual entitlement; and
(c)received $29,697.72 CCS for the 2022/2023 income year, with the entire amount of $29,697.72 being in excess of her actual entitlement.
The Respondent therefore submits that NMVQ has debts of $11,669.57, $19,231.37 and $29,697.72 respectively for the 2020/2021, 2021/2022 and 2022/2023 income years pursuant to subsections 71C(1) and 71B(1) of the Act.
Notably, the 2022/2023 overpayment and resulting debt was originally calculated based upon information from the Australian Taxation Office that NMVQ’s 2022/2023 adjusted taxable income was $149,413 and her partner’s was $182,261. However, on 27 October 2023, the ATO provided revised reconciliation information showing that NMVQ’s adjusted taxable income had changed to $213,578 (with the total of her and her partner’s adjusted taxable income therefore being $331,674). This resulted in the Respondent varying the earlier decision and recalculating the CCS debt for the 2022/2023 income year to $29,697.72. Subsection 115(1) of the Administration Act provides for an application to the Tribunal to be taken to be an application for review of such a decision as substituted and the debt decision as varied in relation to the 2022/2023 income year is the decision before me in relation to that income year.
In written submissions, NMVQ noted that she had an ongoing objection with the Australian Taxation Office in relation to the amended adjusted taxable income for 2022/2023 but did not dispute the estimates provided by her, the amounts of her and her partner’s currently assessed actual adjusted taxable incomes and the resulting overpayments and debts. NMVQ confirmed at hearing that her position is that the debts should be waived – she should not have to repay them.
Based upon the evidence, including the adjusted taxable income information from the ATO, I am satisfied that NMVQ was overpaid CCS in the 2020/2021 income year and had no entitlement to CCS in the 2021/2022 and 2022/2023 income years. It follows that NMVQ has a debt to the Commonwealth of $11,669.57 for the 2020/2021 income year pursuant to subsection 71C(1) of the Act and debts to the Commonwealth of $19,231.37 and $29,697.72 respectively for the 2021/2022 and 2022/2023 income years pursuant to subsection 71B(1) of the Act.
Issue 2 - Are there grounds for write off or waiver of recovery of all or part of the debts?
Section 82 of the Administration Act provides that a debt due to the Commonwealth under the family assistance law is recoverable by one or more of the methods set out in that section. Usually, a debt must be repaid unless the law provides otherwise. As referred to by the Respondent in their SFIC, French J recognised this general premise in Secretary, Department of Social Security v Hales [1998] FCA 210 (Hales) where it was stated as follows:
The taxpayer is entitled to expect that in the ordinary course money paid to people which they are not entitled to receive will be recovered, albeit in a way appropriate to the circumstances which led to the overpayment and the circumstances of the persons concerned. However, the confining of a recovery regime by rigid rules, particularly in this area of the law, is likely to be productive of unfair or harsh outcomes in some of the great variety of fact situations that can arise. There are provisions in the Act which recognise that reality. They relate to the writing off and the waiver of debts otherwise due to the Commonwealth. This case primarily concerns the proper construction of a section of the Social Security Act 1991 (Cth) which provides for the waiver of debts where special circumstances are found to exist. There is a tension in the construction of such provisions between the needs for certainty of application and flexibility of response to the situations that may arise from time to time.
Sections 95, 97 and 101 of the Administration Act permit writing off or waiving of a debt or part of a debt in certain circumstances and are of potential relevance.
Write-off
Pursuant to section 95 of the Administration Act, recovery of a debt can be written off – in other words, recovery can be temporarily suspended – only if certain strict conditions are met, such as the person’s whereabouts are unknown or they have no capacity to repay the debt. Section 95 has no application in NMVQ’s circumstances and write off is not permitted pursuant to section 95 of the Administration Act.
Sole administrative error waiver
Section 97 of the Administration Act provides that a debt (or the relevant proportion thereof) must be waived if it was attributable solely to an administrative error made by the Commonwealth, where the amount overpaid was received by the person in good faith. Further, where the debt is raised before specified time periods, including the end of the income year after the income year in respect of which the debt accrued, for waiver to occur under section 97 of the Administration Act, the debtor must demonstrate that being required to repay the debt would cause them severe financial hardship.
The Respondent contended that there was no sole administrative error on the part of the Commonwealth, noting that:
(a) the debts arose due to NMVQ’s providing inaccurate estimates of her family income for the relevant income years;
(b) NMVQ was sent 11 notices between 23 July 2021 and 28 June 2023 requiring her to notify Centrelink of any events that could affect her CCS entitlement including changes to her family income[2].
(c) On 14 February 2022, NMVQ was issued with an overpayment notice in relation to her receipt of Family Tax Benefit (FTB) for the 2020/2021 income year[3] following which, on 21 July 2022, she contacted Centrelink to enquire about the FTB debt. It was recorded that she enquired about her family income in relation to the FTB account payable,[4] demonstrating that she knew how to contact Centrelink and arguably had reason to clarify whether income included investment losses. A further notice issued to NMVQ on 7 November 2022[5] noting her family income for 2021/2022 was $422,891. This put NMVQ on notice with regard to the income components for family assistance purposes as early as February 2022, and NMVQ should therefore have realised by then if not earlier what ‘income’ was for the purposes of CCS.
(d) There is no provision in the legislation which imposes a timeframe for the reconciliation process to be undertaken by the Respondent. Any delay in raising the debts did not contribute to the debts, which arose because of the difference between the estimated and actual adjusted taxable income of NMVQ for the relevant income years.
(e) In ordinary circumstances, the CCS reconciliation for the 2020/2021 and 2021/2022 income years would have been undertaken at an earlier time. However, because of the COVID-19 pandemic, there was a pause on debt raising and debt recovery.[6]
[2] Pages 266-268, 271-273, 274-276, 279-281, 282-284, 285-287, 288-290, 291-293, 294-296, 297-299 and 300-302 of the documents provided by the Respondent pursuant to section 37 of the Administrative Appeals Tribunal Act 1975 (the Act) as in force at the time (the T documents).
[3] Pages 602-605 of the supplementary documents provided by the Respondent pursuant to section 37 of the AAT Act (the supplementary T documents).
[4] Page 172 of the T documents.
[5] Pages 617 to 602 of the supplementary T documents.
[6] Page 334 of supplementary T documents.
NMVQ contends that Centrelink erred in delaying reconciliation of her entitlements and the consequent raising of debts. NMVQ’s 14 August 2024 submissions included as follows (unedited):
22.I would have expected that child care subsidy is rebalanced on a yearly basis and if there are overpayment, that it is communicated to me and that I am given enough time to pay the debt to ease pressure. None of these happened.
23.Clearly the evidence suggests that Centrelink moved at a leisurely pace and took too long to suspend and then stop my child care subsidy benefits…
24.Media Release is being used as an excuse to Centrelink’s administrative delay because the dates do not seem to line up.
…
26.I lodged my tax return before the due date on 31 October 2021.
27.Centrelink should been in the position to rebalance my child care subsidy after anytime after anytime after 31 October 2021.
28.Media release clearly states that debt repayments will start again in February 2021 which is within the 2020-2021 financial year and earlier than the timeframes on financial year end and tax return lodgement due date.
NMVQ submitted that in the same way she has obligations to the Respondent, the Respondent should have obligations to her. Having been expected to have lodged her tax return by 31 October every year, she would have expected the Respondent to then be in a position to reconcile her entitlements in a timely manner after lodgment of her tax return.
The Respondent does not dispute that there was delay in raising the debts but contends there was no error in this regard, noting there is no legislative time limit for reconciliation, and consequential debt raising. The Respondent further contends that the delay included because of a decision made by the Federal Government to pause debt raising and recovery to assist people during the COVID-19 pandemic.
In considering whether the debts were attributable to sole administrative error, I note that the Full Federal Court in Dranichnikov v Centrelink [2003] FCAFC 133 (Dranichnikov) discussed the meaning of administrative error as follows:
It is neither possible nor appropriate to attempt a meaning of the words “administrative error” which would accurately cover every case for much will turn upon the circumstances. Essentially, however, the concept is one where the error or mistake arises as a result of the procedure that has been adopted. An obvious example would be payment of a benefit where the decimal point was wrongly located. An error made by Centrelink or the Australian Taxation Office acting on its behalf in its administration of the law will generally be an administrative error. On the other hand, a decision made, for example, on a question of legal entitlement to a benefit while no doubt made in the course of administration of the law would not be an administrative error.
The debts were raised on 23 and 29 November 2023, more than two years after the usual due date for lodgment of 2020/2021 tax returns (31 October 2021), more than a year after the usual date for lodgment of 2021/2022 tax returns (31 October 2022) and just after the usual due date for lodgment of 2022/2023 tax returns (31 October 2023).
I acknowledge and accept NMVQ’s submission that had the 2020/2021 reconciliation and resulting raising of the debt for that income year been undertaken at an earlier date, she would likely have become aware of the issue with her income estimate and would likely have taken different action in relation to the 2021/2022 and 2022/2023 income years. Nonetheless, I am not satisfied that there has been administrative error on the part of the Respondent. There is no obligation for the Respondent to carry out the reconciliation, and consequential raising of debts, within a set time frame. At least some of the reason for the delay on the part of the Respondent was because of the Federal Government’s understandable pause of debts of this nature in order to assist the public throughout the COVID-19 pandemic. NMVQ submitted that the debt pause was important information for her and she could not be expected to check Media Releases on a regular basis to check if there were announcements relevant to her. She instead relied upon information Centrelink presented to her. However, there was no obligation upon the Respondent to individually notify NMVQ of the Federal Government’s debt pausing. I am not satisfied that there was any administrative error by the Respondent in delaying reconciliation and debt recovery nor in not advising NMVQ individually of the debt pause action undertaken by the Federal Government.
NMVQ also suggested that there was administrative error on the part of Centrelink because it was not made clear to her in letters from the Respondent as to what constituted the income that she had to report. I discussed the content of the letters NMVQ received from the Respondent from time to time, including by way of example a letter dated 28 June 2022[7]. I noted that the letter includes, on the second page, the matters that a recipient must advise about if their circumstances change, including ‘your family’s income estimate’. I further noted that the letter states that a full list of changes that a recipient needed to advise about were stated to be found at ‘servicesaustralia.gov.au/notifychanges’ and that the specified link led, via further links, to information showing that adjusted taxable income includes, amongst other things, total net investment losses and reportable superannuation contributions. I asked NMVQ if she took the opportunity at any time to refer to that link. NMVQ’s evidence was that she just looked at the letter and there was nothing on the face of the letter that gave her information suggesting that her ‘family’s income estimate’ would be other than what would ordinarily be understood by that term. NMVQ said the letter didn’t tell her anything about investment losses or reportable superannuation contributions. NMVQ said that she didn’t need to access the link because the letter told her what she had to provide – her family’s income estimate. She estimated the income as she thought she needed to do. She didn’t hear anything from Centrelink so again estimated the income the same way the following years.
[7] Pages 606 and 607 of the supplementary T-documents.
The Respondent submitted that details of the income that needed to be included in income estimates were referred to in letters to NMVQ in relation to FTB, including by way of example, a letter dated 25 June 2021 in relation NMVQ’s FTB entitlement[8] which included the following information on the second page:
[8] Pages 508 to 509 of the supplementary T documents.
The income details you must tell us about include changes to your or your partner’s:
-taxable income including income from salary and wages, lump sum payments, business or self employment, investments and real estate, taxable government pension and benefits and other taxable income
-reportable fringe benefits
-reportable superannuation contributions
-total net investment losses
-tax free government pensions and benefits
-foreign income
-child support you pay
-tax exempt foreign income
NMVQ confirmed that she had received the 25 June 2021 letter but said she did not pay attention to all of the details in the terms and conditions, but even reading it now her response would be the same. She would not have taken this information to apply to CCS – the letter was about FTB. She had no reason to think CCS was calculated in the same way.
I accept NMVQ’s submissions that absent any other information, there was no reason for her to assume that the letters relating to FTB were also relevant to her CCS entitlement.
Ideally the Respondent’s letters could be much clearer and give more information in relation to the components of ‘family income’ in the letter itself. It is understandable in the circumstances, and given the lack of detail and clarity of the letters, that NMVQ was mistaken in her understanding of what she needed to include in her family’s income estimate. However, that does not amount to administrative error on the part of Centrelink. The debts arose because NMVQ, albeit innocently and unintentionally, incorrectly estimated her family income. There was no administrative error on the part of the Respondent.
I have found that there was no administrative error on the part of the Respondent, either because of delay in raising the debts nor based upon the wording of its letters. It follows that wavier cannot occur pursuant to section 97 of the Administration Act.
As I have found that there was no error by the Respondent such that section 97 of the Administration Act has no application, it is not necessary for me to consider whether the overpaid amounts were received in good faith by NMVQ. Nonetheless, given the Respondent’s submissions in relation to the issue of good faith, I will also address that issue.
For the purposes of similar legislative provisions, the Federal Court held in Secretary, Department of Education, Employment, Training and Youth Affairs v Prince (1997) 50 ALD 186 (Prince) when considering the issue of good faith, the concern is with the state of mind of a person regarding their receipt of the relevant payment. Where a person knows or has reason to know that he or she is not entitled to a payment received, the payment is not received in good faith.
I discussed a number of matters with NMVQ at hearing in relation to whether she was aware of the components that needed to be included in her income estimates. The Respondent submitted that NMVQ had reason to know that her income estimates should have included investment loss, including because of the Respondent’s advice to NMVQ on 2 November 2020[9] that she had no entitlement to CCS with her income noted as $266,293 in circumstances where she had estimated income of $62,192. I accept NMVQ’s evidence that even given this letter in relation to her 2019/2020 CCS entitlement, she genuinely did not understand, at the relevant time, that her income estimate should have also included her and her husband’s investment losses and reportable superannuation contributions. NMVQ said when she originally gave the estimate that year, she was on maternity leave. It was the first time she was claiming CCS. Further, as regards the letter regarding FTB entitlement, NMVQ said she did not realise at the time that information in letters about FTB would also be relevant for CCS. She had no reason to understand that. NMVQ stated that none of the information in any of the CCS letters stated anything about net investment losses or reportable superannuation contributions being included.
[9] Page 259 of the T Documents
I acknowledge the Respondent’s submissions and conclusion[10] that NMVQ did not meet the good faith requirement however I accept that at the relevant time NMVQ genuinely did not understand that she was not correctly reporting her income estimates and that she at all relevant times thought she was receiving her correct CCS entitlement. On that basis, I am satisfied that NMVQ received the relevant overpayments in good faith.
Special circumstances waiver
[10] Clause 74 and 75 of the Respondent’s SFIC
Of further potential relevance, section 101 of the Administration Act provides for waiver of recovery of all or part of a debt if there are special circumstances (other than financial hardship alone) which make such waiver desirable. Waiver pursuant to section 101 requires three matters to be satisfied as follows:
(a) that the debt did not result wholly or partly from the debtor or another person knowingly making a false statement or a false representation or failing or omitting to comply with a provision of the family assistance law;
(b) that there are special circumstances (other than financial hardship alone) that make it desirable to waive; and
(c) that it is more appropriate to waive than write off the debt or part of the debt.
I have already canvassed the circumstances of NMVQ’s reporting of her income estimates and have concluded that NMVQ received the overpayments in good faith. For similar reasons, I am also satisfied that NMVQ did not knowingly make a false statement or a false representation or knowingly fail or omit to comply with a provision of the family assistance law. I have considered the Respondent’s submissions in this regard, and the case authorities referred to in relation to the issue. However, I am satisfied that NMVQ genuinely did not understand that her family income estimates for CCS purposes should include net rental investment loss and reportable superannuation contributions. I find that the debts did not result wholly or partly from NMVQ or any other person knowingly making a false statement or false representation or knowingly failing or omitting to comply with one of the Acts.
As regards “special circumstances”, the term is not defined in the legislation. The Federal Court and the AAT have considered the issue of special circumstances on a number of occasions. In every case, the individual circumstances of the case were examined to determine whether the circumstances were such that it would be unjust, unreasonable or inappropriate for the debt to be recovered. In particular, the Full Court of the Federal Court in the matter of Dranichnikov determined that whether there are special circumstances in a particular case is dependent on whether there are circumstances that would distinguish the case from the usual case. It is also appropriate when considering the exercise of this discretion, to have regard to the objects of the Act in the recovery of social security overpayments. The Federal Court in Angelakos v Secretary, Department of Employment and Workplace Relations [2007] FCA 25 emphasised that it is not the intention of Parliament that the exercise of this discretion be confined to the “exceptional” case, but rather that there is something that distinguishes the case from the ordinary or usual case. Further, for special circumstances to exist there must be some factors apart from financial hardship alone, which distinguish the case and set it apart from other similar cases.
In considering the waiver provision, I am mindful of the comments of French J in Hales that persons who receive money they are not entitled to receive are generally expected to repay the monies.
Summary of NMVQ’s submissions in relation to special circumstances
NMVQ submitted that there are a number of matters that should be taken into account and accepted as constituting special circumstances in her case that make it appropriate to waive the debts. Written submissions dated 14 August 2024 addressed a number of these matters including as follows:
(a)Centrelink’s delay had a detrimental effect on her family’s finances, emotional health and resilience to face adversity;
(b)Had Centrelink reconciled her CCS on time and she was informed in a timely manner, she could have avoided accumulating the debts;
(c)If she had known her CCS entitlement (or lack of entitlement), one of the options she would have considered was instead sending her eldest son to a fully subsidised preschool where he had been offered a place and, further, she would have also not delayed his commencement of school by a year in reliance upon CCS subsidised childcare;
(d)Other options available to her, had she known of her correct CCS entitlement or lack of entitlement, would have been to ask extended family members to assist with her sons’ care or to reduce their childcare hours;
(e)Had she known of her CCS entitlement (or lack of entitlement) at an earlier time, she could have made an informed decision about the care of her children and the impact to their financial situation and the most cost effective way to care for her children;
(f)Child care was discretionary spending for her and had she known in a timely manner of her correct CCS entitlement, she could have made different financial decisions. The debts have detrimental consequences that put her family at a disadvantage financially;
(g)Her husband lost his job on 5 November 2023. She lost her job on 9 May 2024. That is putting her whole family in financial strain;
(h)She is currently undergoing treatment pursuant to a Mental Health Treatment Plan, triggered by her job termination. She has been having treatment with a psychologist but the stress of the debts with Centrelink has led to regression for her. The debt recovery process with Centrelink is putting her in a lot of emotional and mental strain; and
(i)She has an ongoing case with Anti-Discrimination New South Wales related to bullying, harassment, discrimination and victimisation related to her job termination.
NMVQ further relied upon the similarity of her circumstances with a number of previous cases where waiver for special circumstances had occurred including in:
(a)Segran and Secretary Department of Education, Employment and Workplace Relations [2008] AATA 799 (Segran)
(b)Patterson and Secretary, Department of Social Services (Social services second review) [2017] AATA 1566 (Patterson)
(c)Perkich and Secretary, Department of Social Security [1997][11] AATA 300; 49 ALD 137 (Perkich)
(d)Ling and Department of Family and Community Services [1999] AATA 797 (Ling)
(e)Re McLean and Secretary, Department of Family and Community Services [2003] AATA 321 (McLean)
(f)Re Phillips and Secretary, Department of Family and Community Services [2005] AATA 996 (Phillips)
[11] NMVQ has incorrectly cited [2007]
NMVQ also submitted that although English was not her first language, she was proficient in plain English and her actions were based upon information presented by Centrelink, with her not having the luxury of time to read the legislation before providing her income estimate. Her evidence was that she had spoken to other mothers receiving CCS and they had also not read the Act.
NMVQ further submitted that her family’s financial circumstances are different to previously and that they are struggling to make ends meet. She submitted that as mature aged parents, their investment properties are to help secure their children’s future in the event they can no longer work due to old age. She said that if they sell their home, they have no other place to live.
NMVQ submitted that an ordinary member of the community would probably say that recouping the debts from her in the circumstances would be unfair, harsh and inappropriate. She referred to the overarching concepts of fairness, appropriateness and justness expounded by Kiefel and French JJ (apparently references to French J in Hales and Kiefel J in Groth v Secretary, Department of Social Security (1995) 40 ALD 541 as referenced in Patterson).
In addition to NMVQ’s written submissions which I have summarised, I asked NMVQ at hearing about her current circumstances and invited NMVQ to make any further oral submissions she wished to make.
NMVQ again referred to the media release about the pause on debt raising and recovery and said whilst she understands the benefit that it might have given to some people, in her circumstances it was a disadvantage because had the first debt been raised in a timely manner, she would not have incurred the subsequent child care costs and associated debts – she would have made alternative arrangements. NMVQ also highlighted the difference between debt raising and reconciliation. Further, NMVQ noted that even accepting the debt pause and the reasons for it, the debts were still not raised, until November 2023, some time after the debt pause ceased in February 2021.
NMVQ further emphasised that child care spending was discretionary spending for her. She has now pulled her children out of child care. She initially reduced their days and once she had alternative arrangements in place for their care, she pulled them out of child care entirely. She could have done this earlier if she knew she was not entitled to any CCS. She was disadvantaged because that option was taken away from her and she did not receive any benefit because as it transpires, she has to pay for the child care. I discussed with NMVQ that it might be considered that she did receive a benefit from the CCS paid to the child care provider at the relevant times because she received the benefit of her children being cared for and only having to pay part of the cost – she therefore received the benefit of the CCS at the time.
NMVQ’s evidence was that she has now arranged for her brother and sister-in-law who are visiting from the Philippines to look after the children and properly informed as to her options, she could have arranged that earlier.
I discussed with NMVQ the Statement of Financial Circumstances completed by her[12] and asked whether there had been any change to her circumstances since completion of the statement. NMVQ’s evidence was that her husband, after losing his job in November 2023, secured new employment approximately two months ago, with an income now of approximately $120,000 per annum, considerably less than he used to receive when he was an IT contractor. She told me that she had two employment roles: she was previously employed as an IT business analyst but lost that job and, on the side, she is a mortgage broker running her own company. The company has only one or two clients and is not doing so well. She is otherwise in the process of an ongoing job application with the Defence Force. She does not yet have a job offer as she is awaiting various clearances and has to pass a fitness test. That has not crystallised into a definite job yet but she is hopeful that will happen. NMVQ confirmed that consistent with her Statement of Financial Circumstances, she and her husband own their own home and six investment properties. NMVQ said their principal place of residence was purchased for approximately $2.2 million in May 2022 and has a mortgage of approximately $1.7 million – she thinks that the current value of the property would now only be about $1.7 million. NMVQ confirmed that additionally they had not sold any of the six investment properties – they do not want to sell any of the properties because if they did so, they would make a loss. They have no intention of selling in the current market.
[12] Pages 132 to 136 of the T documents.
I discussed with NMVQ that based upon the approximate values of the investment properties she had estimated and the approximate outstanding mortgages, she and her husband had net equity in the investment properties of approximately $880,000. NMVQ agreed that was a fair estimate.
NMVQ said that she recognised that it could be said that they were ‘asset rich’ but they are ‘income poor’. She said their current circumstances are such that they do not have a lot of income like they used to. Both she and her husband used to be IT contractors earning a much higher daily rate, which is how they managed to build up their assets. However, their current circumstances have changed. The monthly loan repayments on the investment properties are $25,000 per month and the monthly rental income is $9,850 (for her) and $6,560 (for her husband). NMVQ said their actual living expenses are lower than average because they live on a rural property and are able to reduce expenses for water, by using rainwater tanks, and electricity, by having solar panels. NMVQ said that although her bank account balance is currently approximately $24,000, the balance is very variable throughout the month depending upon receipt of rent and payment of mortgage payments from time to time.
I noted NMVQ’s written submission that as mature age parents, she and her husband would not be able to provide for their children for very long. NMVQ said she turned 40 this year and that her husband was shortly turning 40. I noted that based upon a normal working life, and assuming good health, it therefore seemed that she and her husband had at least a couple of decades of earning capacity ahead of them and noted that it would therefore be expected that her children would reach adulthood before it might be expected that she and her husband no longer had capability of earning income from work. NMVQ responded that the culture in Australia is very different from her culture in the Philippines and she would be planning to pay for and send her children to university in another 20 years. NMVQ said that if everything goes well, she could still be working in 20 years but she is trying to protect her children’s future because anything could happen in life. For example, she and her husband could never have imagined that they would have been unemployed for as long as they recently have been, with her husband unemployed from November 2023 until August 2024 and her now unemployed since May 2024.
Summary of the Respondent’s submissions in relation to special circumstances
The Respondent’s written and oral submissions as to why there are not special circumstances in NMVQ’s case that make it appropriate to waive the debts included as follows:
(a) NMVQ’s circumstances are not sufficiently unusual, uncommon or exceptional so as to make her case markedly different from the usual or ordinary run of cases and otherwise ‘special’. Rather the matters raised are more akin to the normal vicissitudes of life. The job losses of NMVQ and her partner and NMVQ’s commencement of mental health treatment due to her job loss are normal vicissitudes of life. NMVQ is still employed in some capacity by her own company. Further, given NMVQ’s investment property portfolio, which is in excess of $3 million as noted by NMVQ in her Statement of Financial Circumstances,[13] NMVQ’s finances are not beyond straitened.
(b) The delay in raising the debts was much shorter than has been the case in other cases where delay in raising a debt was found to be a special circumstance, such that NMVQ’s case is distinguishable noting that the delay in McLean was six years and in Salangsang and Secretary, Department of Education, Employment and Workplace Relations [2010] AATA 55, the delay was eight years. Further, there was no prejudice or disadvantage caused to NMVQ in terms of any impact on providing evidence as to the existence or quantum of the debt.
(c) NMVQ has six investment properties with a declared current value of $3 million and a bank balance of $24,618.72 and no financial hardship. NMVQ should turn to her plentiful resources before seeking assistance from the public purse.
(d) There is no injustice or unfairness in requiring NMVQ to repay public monies to which she had no entitlement. NMVQ has financial capacity to repay the debt.
Conclusion – Special circumstances
[13] Page 135 of the T documents.
After exploring the evidence as to her circumstances at hearing, I discussed with NMVQ that whilst I had not reached a conclusion, I held a concern that a consideration of all her circumstances together, including her financial circumstances, might lead to a conclusion that there are not special circumstances, other than financial hardship alone that make it appropriate to waive the debts. I invited NMVQ to address any further matters she wished. NMVQ responded that she did not understand the Respondent’s position in relation to special circumstances. The Respondent repeated and relied upon earlier submissions in relation to how the debts arose and submitted that NMVQ’s circumstances were not ‘unusual, uncommon or exceptional’. The Respondent noted that although NMVQ’s husband had lost his job in November 2023, he is now gainfully employed earning a reasonable income of $120,000 and with, on NMVQ’s evidence, modest living expenses. NMVQ is also employed in her own business and is likely to have further full-time employment in the near future. The family has approximately $880,000 equity in six investment properties and associated rental income and more than sufficient resources to repay overpaid public monies to which she was not entitled.
NMVQ responded stating that the equity in question is just paper value, and not actual values. She said that if the properties were sold, regard also needs to be had to expenses such as an agent’s commission fees. NMVQ said that it would not be a wise decision on her part to sell the properties and go back to where she started when she first arrived in Australia. I noted that it was entirely a matter for NMVQ as to whether she sold any properties but that a relevant consideration for me when considering the special circumstances waiver provision was whether it could be said that repaying the debts would cause financial hardship in circumstances where she had the equity noted in the properties. I accepted that there would be expenses associated with selling property but that there would still be remaining equity. NMVQ said she does not disagree that there is equity but said that it is all paper value. NMVQ said that just because she has the properties does not mean that it is fair that she has to pay the debts that she could have avoided if Centrelink had not delayed.
I note that in Shonoodh and Secretary, Department of Social Services (Social services second review) [2019] AATA 768, in not dissimilar circumstances to NMVQ’s, Member Hallwood stated:
Mr Shonoodh and his wife receive modest incomes from their business. They offset their rental property losses against their income as it is legitimate to do. It may be challenging for him and his wife that their property holdings are heavily geared and that the Northern Territory properties are worth less now than when they were purchased. It is not unusual, uncommon or exceptional for people investing in property to face losses and shifting fortunes.
It is of course a matter for NMVQ how she chooses to manage her financial circumstances and her properties. However, given NMVQ’s and her husband’s current income, property ownership and financial circumstances I am not satisfied that financial hardship would be occasioned to NMVQ by repayment of the debts.
I accept as found in Hales when discussing the analogous special circumstances wavier provision in section 1237AAD(b) of the Social Security Act 1991, that financial hardship is not mandatory for the special circumstances waiver to have application. French J noted as follows in that regard:
The concept of special circumstances is broad. A constellation of factors, including financial circumstances, may fall within it. The express exclusion of financial hardship alone as a special circumstance is an indicator that it would otherwise be included. This gives some measure of the range of circumstances which will qualify as special. But as a matter of grammar and ordinary logic, the exclusion of financial hardship alone as a special circumstance does not mandate its inclusion in the range of matters constituting such circumstances for the purpose of enlivening the Secretary’s discretion.
On this point and as a matter of construing this section by reference to the ordinary meaning of its words, the Secretary’s submission that there cannot be special circumstances for the purpose of s 1237AAD(b) unless there is also financial hardship is not accepted. The Explanatory Memorandum does not undercut this conclusion. There it is said that the new special circumstances provision can only be used where the debt arose because of an innocent mistake by a social security recipient. Secondly, it is said that financial hardship of itself is not a sufficient reason to waive the debt. This is in substance a restatement of the ordinary meaning of the provision.
The evident purpose of s 1237AAD is to enable a flexible response to the wide range of situations which could give rise to hardship or unfairness in the event of a rigid application of a requirement for recovery of debt. It is inappropriate to constrain that flexibility by imposing a narrow or artificial construction upon the words. It may be that there will be few cases in which the Secretary will be satisfied that there are special circumstances in the absence of financial hardship. It may be that there are few cases in which having found special circumstances to exist, the Secretary would exercise the discretion to waive in the absence of financial hardship. But to anticipate the limits of the categories of possible cases by imposing on the language of the section a fetter upon its application which is not mandated by its words, is to erode its useful purpose.
Whilst not mandating financial hardship, French J recognised that it may be there will be few cases in which there are special circumstances (making it appropriate to waive) in the absence of financial hardship. I had regard to all of the circumstances in NMVQ’s case both individually and cumulatively when considering whether there are special circumstances, other than financial hardship alone, that make it appropriate to waive the debts or part thereof.
I accept all of the matters raised by NMVQ including as supported by medical documents, documents about alternative choices she had for her children’s child care and documents in relation to NMVQ’s anti-discrimination case.
I acknowledge that NMVQ and her husband’s circumstances now are different to when they were both working as IT consultants. Although her partner is now again employed, I accept that he is earning less income than previously and that he had approximately nine months of unemployment. Although her job prospects in the near future look promising, I accept that NMVQ does not currently have full-time employment and has limited income from her own business. Ideally, had Centrelink reconciled NMVQ’s 2020/2021 CCS entitlement at an earlier time, NMVQ would then likely have made different decisions in relation to her child care options and therefore not been overpaid CCS for the 2021/2022 and 2022/2023 income years. Further, Centrelink’s letters could certainly be clearer in relation to a recipient’s obligations. Ideally, further, however, NMVQ could more carefully have considered the letters from Centrelink including the links included on the second page of the letters in relation to changes NMVQ was required to notify (I note that this same link was included in the recent 30 September 2024 letter that NMVQ provided that she had received from Centrelink). I am not being critical of either Centrelink or NMVQ in making those observations. As I have already canvassed there was no timeframe within which Centrelink was required to reconcile NMVQ’s entitlements and the debt pauses by the Federal Government were obviously undertaken with the intention of benefiting those impacted by the COVID-19 pandemic. Further, although links to more detailed information were provided in Centrelink’s letters and she could have referred to those links, it is understandable that NMVQ did not go to the extent of looking at the website referred to for further details.
I considered the case authorities raised by NMVQ and her submission that her circumstances were analogous to those cases. I note as follows in relation to each of those cases:
(a) Segran - NMVQ submitted that in Segran, the Tribunal suggested that a person must have in some way been advantaged. She submitted that not a single cent of the CCS went into her pocket; and that rather it was the child care centre that benefited from the money. She was not better off as a result of the payments and was, in fact, worse off because she had to pay a significant amount of the ‘gaps’ for child care. I note that in Segran, unlike in NMVQ’s circumstances, Ms Segran was not aware that a claim had been lodged (by her then husband) nor that amounts were paid. On the contrary, NMVQ claimed CCS and was aware that CCS was paid to the child care provider offsetting her child care costs. Had the CCS not been paid to the child care provider, NMVQ would have had a higher out-of-pocket child care cost herself at the time for the benefit of receiving child care for her children. Unlike Ms Segran, NMVQ did receive the benefit of the monies. I accept that NMVQ may have made different choices and may not have incurred child care costs at all if she knew of her correct entitlement but that is a different proposition to the proposition that she did not obtain the benefit of the CCS.
(b) Patterson – NMVQ submitted that in Patterson, the Tribunal accepted ‘administrative delay’ as a special circumstance where, similar to her situation, there was no scope for writing off the debt, the evidence did not support that the debt arose solely because of administrative error by the Commonwealth and repayment of the debt would not cause severe financial hardship. She noted that a further question needs to be addressed (based on Patterson) of whether she contributed to the state of affairs and whether she could have rectified the state of affairs and she could not have rectified what she did not know – she was not in a position to take proactive steps to avoid incurring a significant child care cost. Notably, however, in Patterson, the Tribunal found that a number of matters founded special circumstances: lack of benefit (with the payments being deposited into a joint bank account with Mrs Patterson’s then husband to which she had no access), lack of knowledge (of the payments being paid to the joint back account), good faith, administrative delay, lack of English skills and financial circumstances. Although delay was accepted as a matrix of the special circumstances in Mrs Patterson’s case, Mrs Patterson’s financial circumstances were such that she earned only a small amount of money, had no assets other than a car worth less than $1,000 and was financially disadvantaged and struggling to make ends meet, in contrast with NMVQ’s financial circumstances and property ownership. Further, unlike NMVQ, Mrs Patterson had a lack of English language skills (although English is not NMVQ’s first language NMVQ acknowledged in written submissions that she is proficient in plain English). Also, to be distinguished is that, for the reasons already canvassed, NMVQ received the benefit of the CCS and was aware of receipt of the CCS.
(c) Perkich - NMVQ submitted that similarly to Perkich, she did not benefit from CCS; rather it was the child care centre that benefited from it and the fact that a social security recipient receives no benefit from an overpayment is an appropriate factor to be weighed when considering whether special circumstances exist. As already canvassed, although NMVQ may have made different child care choices had she known of her actual CCS entitlement, she did receive the benefit of the CCS.
(d) Ling – NMVQ submitted that her circumstances were similar to Ling, remarking that the recipient obtained no advantage because they were unaware that they were continuing to receive benefits: similarly, she submitted, she was not aware that she was not entitled to CCS. In Ling, the Tribunal took into account the fact Mrs Ling was not aware of nor benefited from a loan asset organised by her husband that ultimately affected her eligibility for a Centrelink payment. However, NMVQ, unlike Mrs Ling was aware that she was receiving CCS and was obtaining the benefit of it.
(e) McLean – NMVQ noted that a delay of six years by Centrelink in raising a debt was found to be a special circumstance. However, notably in McLean, the delay was considerably longer than in NMVQ’s case (six years compared to up to just over two years) and the delay meant Ms McLean could not access records about her income with documents long since having been destroyed. That is not applicable in NMVQ’s case.
(f) Phillips – NMVQ noted that the applicant in Phillips wrote to Centrelink on three occasions asking to be advised of any further requirements, without response from Centrelink during a time when Centrelink was on notice from taxation assessments that a discrepancy existed between previously stated earnings and actual earnings but did nothing about the accumulating overpayment. The Tribunal waived the debt from after the first income tax assessment provided to Centrelink. Notably, unlike in NMVQ’s case, in Phillips, Centrelink failed to act on information provided.
Each of the previous cases referred to by NMVQ are distinguishable from NMVQ’s case. Notably, a consideration of whether special circumstances, other than financial hardship alone, exist that make it appropriate to waive a debt requires consideration of an individual’s own unique circumstances. Guidance can be gained from considering previous similar cases, however, ultimately the question is to be answered having regard to the individual’s own particular circumstances.
I accept the Respondent’s submissions that the usual vicissitudes of life, including NMVQ’s and her husband’s employment issues and NMVQ’s mental health issues, do not amount to special circumstances. In Bokhoree and Secretary, Department of Social Services (Social services second review) [2017] AATA 871, the Tribunal found that the usual vicissitudes of life, are not “uncommon”, “out of the ordinary”, or “exceptional” circumstances and are generally not “special circumstances” for the purposes of the Act.
I have taken all matters into account, both individually and cumulatively in relation to NMVQ’s circumstances. I am not satisfied that NMVQ’s circumstances considered individually or cumulatively make it unfair for the overpaid CCS to be repaid nor that it would be unjust, unreasonable or inappropriate to recover the debts. NMVQ received in excess of her entitlement in circumstances where she has significant resources available to her to repay overpaid public monies. I am not satisfied that there are special circumstances in NMVQ’s case, other than financial hardship alone, that make it desirable to waive the debts or any part thereof.
It follows that section 101 of the Administration Act has no application.
There being no other relevant legislative provisions, I conclude that the debts must be recovered.
DECISION
The decision under review is affirmed.
Date of hearing: 1 November 2024 Representative for the Applicant: Not applicable Representative for the Respondent: Ms Thinaranjini Balakisnan
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